FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
E-COMMERCE ACT AND INSURANCE LAW
E-COMMERCE ACT
GOVERNING LAW: RA 8792
*Take note of distinction between
electronic data message and electronic
signature
OBJECTIVE:
KEY TERMS:
Section 3. Objective - This Act aims to
facilitate domestic and international
dealings, transactions, arrangements
agreements, contracts and exchanges
and storage of information through the
utilization of electronic, optical and
similar medium, mode, instrumentality
and technology to recognize the
authenticity and reliability of electronic
documents related to such activities and
to promote the universal use of
electronic transaction in the government
and general public.
ELECTRONIC DATA MESSAGE: (SEC.
5 (C) [E-D-M]
Why do we need to have an ecommerce act?
ELECTRONIC SIGNATURE: (SEC. 5 (E)
[E-S]
It would be hard for the parties in
different areas to come up with an
agreement and it would be hard
to execute documents.
When there is an immediate need
to execute agreements, where the
effectivity and validity is a
necessity, but there is no need to
do the traditional way to bring the
parties together. Not necessarily a
written document, but through
electronic means.
(e) "Electronic Signature" refers to any
distinctive mark, characteristic and/or
sound in electronic form, representing
the identity of a person and attached to
or logically associated with the electronic
data message or electronic document or
any
methodology
or
procedures
employed or adopted by a person and
executed or adopted by such person with
the intention of authenticating or
approving an electronic data message or
electronic document.
o
o
APPLICABILITY:
Section 4. Sphere of Application - This
Act shall apply to any kind of data
message and electronic document used
in the context of commercial and noncommercial
activities
to
include
domestic and international dealings,
transactions, arrangements, agreements
contracts and exchanges and storage of
information.
(c) "Electronic Data Message" refers to
information generated, sent, received or
stored by electronic, optical or similar
means.
o
o
o
Ex: There is a trading lingo term
and it was used and indicating
offers and acceptance of the same,
it is an EDM.
I buy, I sell = sufficient.
It is not necessary to use a paper
to sign because there is already an
e-signature.
ELECTRONIC DOCUMENT: (SEC. 5 (F)
[E-D]
(f) "Electronic Document" refers to
information or the representation of
information, data, figures, symbols or
other modes of written expression,
described or however represented, by
which a right is established or an
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
E-COMMERCE ACT AND INSURANCE LAW
obligation extinguished, or by which a
fact may be prove and affirmed, which is
receive, recorded, transmitted, stored,
processed,
retrieved
or
produced
electronically.
by an electronic document if the said
electronic document maintains its
integrity and reliability and can be
authenticated so as to be usable for
subsequent reference, in that -
Ex: Deed of Sale in an e-mail
format. It need not to be in a paper
format for it to be affixed by the
parties because e-signature can
also bind the parties.
i. The electronic document has remained
complete and unaltered, apart from the
addition of any endorsement and any
authorized change, or any change which
arises in the normal course of
communication, storage and display;
and
o
LEGAL
RECOGNITION
OF
ELECTRONIC DATA MESSAGE: (SEC.
6)
Section
6. Legal
Recognition
of
Electronic Data Messages - Information
shall not be denied legal effect, validity
or enforceability solely on the grounds
that it is in the data message purporting
to give rise to such legal effect, or that it
is merely referred to in that electronic
data message.
o
o
Supposed parties agreed on the
contents of EDM exchange, what
is the rule? >> Sec. 6^
Can the other party who thought of
setting aside the agreement say
that the agreement is no longer
valid because it is an EDM and it
is not written? >> It cannot be
done. The exchange of EDM is
already sufficient to prove that
there is a contract between the
parties.
LEGAL
RECOGNITION
OF
ELECTRONIC MESSAGES: (SEC. 7)
Section
7. Legal
Recognition
of
Electronic
Documents Electronic
documents shall have the legal effect,
validity or enforceability as any other
document or legal writing, and (a) Where the law requires a document
to be in writing, that requirement is met
ii. The electronic document is reliable in
the light of the purpose for which it was
generated and in the light of all relevant
circumstances.
(b) Paragraph (a) applies whether the
requirement therein is in the form of an
obligation or whether the law simply
provides consequences for the document
not being presented or retained in its
original from.
(c) Where the law requires that a
document be presented or retained in its
original form, that requirement is met by
an electronic document if i. There exists a reliable assurance as to
the integrity of the document from the
time when it was first generated in its
final form; and
ii. That document is capable of being
displayed to the person to whom it is to
be presented: Provided, That no
provision of this Act shall apply to vary
any and all requirements of existing laws
on formalities required in the execution
of documents for their validity.
For evidentiary purposes, an electronic
document shall be the functional
equivalent of a written document under
existing laws.
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E-COMMERCE ACT AND INSURANCE LAW
This Act does not modify any statutory
rule relating to admissibility of electronic
data massages or electronic documents,
except
the
rules
relating
to
authentication and best evidence.
o
o
o
o
Note: EDM and ED are used
interchangeably. EDM in more
technical terms are shorter,
though. They have the same
importance.
ED shall have the legal effect,
validity, or enforceability as any
other document or legal writing,
just like a legal document because
it has only an electronic format. It
has the same effect in the eyes of
law.
For evidentiary purposes, an ED
shall be the functional equivalent
of a written document under
existing laws. (Sec 7)
One can present the ED signed by
the parties and that is valid,
enforceable just like a written
paper document. There is no
distinction between written and
ED. The one disputing the
agreement cannot use the defense
that it is electronic for it to be
admissible in evidence.
LEGAL
RECOGNITION
OF
ELECTRONIC SIGNATURES: (SEC, 8)
Section
8. Legal
Recognition
of
Electronic Signatures. - An electronic
signature on the electronic document
shall be equivalent to the signature of a
person on a written document if that
signature is proved by showing that a
prescribed procedure, not alterable by
the parties interested in the electronic
document, existed under which -
approval
signature;
through
the
electronic
(b) Said method is reliable and
appropriate for the purpose for which
the electronic document was generated
or communicated, in the light of all
circumstances, including any relevant
agreement;
(c) It is necessary for the party sought to
be bound, in or order to proceed further
with the transaction, to have executed or
provided the electronic signature; and
(d) The other party is authorized and
enabled to verify the electronic signature
and to make the decision to proceed with
the transaction authenticated by the
same.
PRESUMPTION
RELATING
TO
ELECTRONIC SIGNATURE (SEC. 9)
Section 9. Presumption Relating to
Electronic
Signatures In
any
proceedings involving an electronic
signature, it shall be presumed that (a) The electronic signature is the
signature of the person to whom it
correlates; and
(b) The electronic signature was affixed
by that person with the intention of
signing or approving the electronic
document unless the person relying on
the electronically signed electronic
document knows or has noticed of
defects in or unreliability of the
signature or reliance on the electronic
signature is not reasonable under the
circumstances.
(a) A method is used to identify the party
sought to be bound and to indicate said
party's access to the electronic
document necessary for his consent or
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
E-COMMERCE ACT AND INSURANCE LAW
ADMISSIBILITY AND EVIDENTIAL
WEIGHT OF E-DATA MESSAGE OR
ELECTRONIC DOCUMENT: (SEC. 12)
Section 12. Admissibility and Evidential
Weight of Electronic Data Message or
Electronic Document. - In any legal
proceedings, nothing in the application
of the rules on evidence shall deny the
admissibility of an electronic data
message or electronic document in
evidence (a) On the sole ground that it is in
electronic form; or
(b) On the ground that it is not in the
standard written form, and the
electronic data message or electronic
document meeting, and complying with
the requirements under Sections 6 or 7
hereof shall be the best evidence of the
agreement and transaction contained
therein.
In assessing the evidential weight of an
electronic data message or electronic
document, the reliability of the manner
in which it was generated, stored or
communicated, the reliability of the
manner in which its originator was
identified, and other relevant factors
shall be given due regard.
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
E-COMMERCE ACT AND INSURANCE LAW
INSURANCE LAW
GOVERNING LAW: RA. 10607
Signed: August 15, 2013
Published: September 5, 2013
CONTRACT OF INSURANCE (SEC. 2A)
(a) A contract of insurance is an
agreement
whereby
one
undertakes for a consideration to
indemnify another against loss,
damage or liability arising from
an unknown or contingent event.
BASIC ELEMENTS OF CONTRACT OF
INSURANCE [P-A-R-I-S]:
1. There
is
a
PAYMENT or
consideration. This is also known
as PREMIUM.
2. There is an ASSUMPTION OF
RISK by the insurer.
3. The insured is subject of RISK of
loss, damage, and liability (LDL).
4. The insured must possess an
INTEREST of some kind on the
person or thing insured which is
generally
susceptible
to
pecuniary estimation, known as
INSURABLE INTEREST.
5. Such assumption of risk is part of
a general SCHEME to distribute
losses.
 ABSENCE of the basic elements
will NOT make the insurance
policy a valid insurance.
CHARACTERISTICS
INSURANCE [C-A-P-U-I]:
OF
1. Insurance
contract
is
a
CONDITIONAL contract.
2. Insurance
contract
is
an
ALEATORY
contract:
which
means that it depends on the
happening of an event which may
or may not happen.
3. Insurance
contract
is
a
PERSONAL contract.
4. Insurance contract is a contract
of UTMOST GOOD
FAITH:
UBERRIMAE FIDEI.
5. Insurance contract is a contract
of
INDEMNITY.
(Not
an
investment contract).
HOW ARE THE TERMS IN
INSURANCE
CONTRACTS
INTERPRETED?
The terms in Insurance contracts
are interpreted in their plain,
ordinary, and popular sense.
(POP interpretation: this means
“what is written in the insurance
contract”)
 “when the terms of the agreement
are clear and explicit that they do
not justify an attempt to read into
it any alleged intention of the
parties, the terms are to be
understood literally just as they
appear on the face of the
contract” (Gaisano Cagayan vs.
Insurance Company of North
America)
IN CASE OF AMBIGUITY IN THE
TERMS OF THE INSURANCE
CONTRACT,
HOW
WILL
AMBIGUITY BE RESOLVED?
The ambiguity shall be resolved
liberally in favor of the insured
and strictly against the insurer.
PARTIES TO A CONTRACT OF
INSURANCE:
1. INSURER
2. INSURED
3. BENEFICIARY
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
E-COMMERCE ACT AND INSURANCE LAW
WHO CAN BE AN INSURER?
Every person, partnership, association,
or corporation duly authorized to
transact insurance business xxx, may
be an insurer. (Sec. 6)
Only the Insurance Commission can
authorize an entity to engage in the
business of insurance in the Philippines.
WHO MAY BE INSURED?
Anyone except a public enemy may be
insured. (Sec. 7)
WHAT IS THE REASON FOR THE
RULE AGAINST INSURING PUBLIC
ENEMIES?
The purpose of war is to cripple the
power and resources of the enemy and it
is inconsistent that one country would
destroy its enemy but only to repay such
destruction due to the insurance it
issued against the enemy.
WHO IS A PUBLIC ENEMY?
A public enemy is a nation or its citizen
who is at war with the Philippines.
BENEFICIARY
Beneficiary is the person or party
entitled to receive the benefits under the
policy issued by the insurer.
TYPES OF BENEFICIARIES IN A LIFE
INSURANCE POLICY:
In this case, the insured has not
waived his right to change the
beneficiary that he designated in
the policy.
2. IRREVOCABLE BENEFICIARY –
is the beneficiary designated in
the policy whose designation is
permanent and may not be
revoked by the insured.
In this case, the insured has
expressly waived his right to
change the beneficiary which he
designated in the policy.
WHAT IS THE RULE ON THE
DESIGNATION
OF
A
BENEFICIARY?
Anyone maybe designated as a
beneficiary in a life insurance
contract EXCEPT those who are
forbidden by law to receive
donation. (Art. 2012, New Civil
Code)
Under Art. 739 of the Civil Code,
the following donations shall be
VOID:
1. Those made between persons
who were guilty of adultery or
concubinage at the time of the
donation;
2. Those made between persons
found guilty of the same
criminal
offense,
in
consideration thereof;
3. Those made to a public officer
or his wife, descendants and
ascendants, by reason of his
office.
1. REVOCABLE BENEFICIARY – is
the beneficiary designated in the
policy whose designation is not
permanent and may be revoked
by the insured.
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
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Supposed a beneficiary is charged
for adultery or concubinage, is
conviction necessary before she can
be denied the benefits of the life
insurance policy?
 No, conviction is not required.
The guilt of the insured and the
beneficiary may be proved by
preponderance of evidence. (Art.
739, New Civil Code)
Can
illegitimate
children
be
designated as beneficiaries in an
insurance policy?
 Yes, because no legal proscription
exists in naming as beneficiaries
the children of illicit relationships
by the insured. (Southern Luzon
Employees’ Assn. vs. Golpeo
citing Del Val vs. Del Val)
Will the share of the designated
beneficiary who is later disqualified
to receive the proceeds of the policy
be forfeited?
 No, the shares of disqualified
beneficiary, whether forfeited by
the court in view of the
prohibition on donations under
Art. 739 of the Civil Code or by the
insurers themselves for reasons
based on the insurance contracts,
must be awarded to the other
designated beneficiaries. (Vda. De
Consuegra vs. GSIS)
WHAT IS THE RULE WHEN THE
BENEFICIARY PREDECEASED THE
INSURED?
If revocable, the proceeds shall go to the
estate of the insured.
If irrevocable, proceeds shall go to the
legal representative/s of the beneficiary.
WHAT IS THE RULE IN THE EVENT
THE
BENEFICIARY
KILLS
THE
INSURED?
The interest of a beneficiary in a life
insurance policy shall be forfeited when
the beneficiary is the principal,
accomplice, or accessory in willfully
bringing about the death of the insured;
in which event, the nearest relative of the
insured shall receive the proceeds of said
insurance if not otherwise disqualified.
(Sec. 12).
WHO IS SUPPOSED TO BENEFIT
FROM THE INSURANCE POLICY?
Under the law, “the insurance proceeds
shall be applied exclusively to the proper
interest of the person in whose name or
for whose benefit it is made, unless
otherwise specified in the policy. (Sec.
53, Insurance Code)
WHAT IS INSURABLE INTEREST?
Insurable interest is the interest that a
person has over certain persons or
things where he has such relation or
connection with, wherein he derives
pecuniary benefit or advantage from its
preservation or will suffer pecuniary loss
or damage from its destruction upon the
happening of the event insured against.
TO WHOM DOES A PERSON HAVE
INSURABLE INTEREST?
1. Of himself, of his spouse, and of
his children;
2. Of any person on whom he
depends wholly or in part for
education or support, or in whom
he has a pecuniary interest;
3. Of any person under a legal
obligation to him for the payment
of money, or respecting property
or services, of which death or
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
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illness might delay or prevent the
performance; and
4. Of any person upon whose life
any estate or interest vested in
him depends.
WHEN
MUST
INSURABLE
INTEREST IN LIFE EXIST?
Insurable interest in the life or health
of a person insured must exist when
the insurance takes effect, but need
not exist thereafter or when the loss
occurs. (Sec. 19, RA 10607).
Is a beneficiary in a life insurance
policy required to have insurable
interest on the life of the insured?
 No, the law does not require that
the
beneficiary
must
have
insurable interest on the life of
the insured. Thus, the insured
may designate anyone, even a
stranger to be his beneficiary.
Is the rule absolute?
 No, a person who is prohibited
from receiving donation cannot be
designated as a beneficiary in a
life insurance policy.
Will divorce bring about
termination of the policy?
the
 No, it will not. Insurable interest
in life insurance is necessary only
at the time the policy is issued. It
is not required once the policy is
already effective.
WHAT
CONSISTS
INSURABLE
INTEREST IN PROPERTY?
1. An existing interest;
2. An inchoate interest founded on
an existing interest; or
3. An expectancy, coupled with an
existing interest in that out of
which the expectancy arises.
WHEN
MUST
INSURABLE
INTEREST IN PROPERTY EXIST?
Interest in property insured must
exist when the insurance takes
effect, and when the loss occurs, but
not exist in the meantime. (Sec. 19,
RA 10607)
CONCEALMENT – A neglect to
communicate that which a party knows
and ought to communicate, is called a
concealment. (Sec 26)
WHEN DOES CONCEALMENT EXIST?
(Great Pacific v. CA)
Concealment exists where the assured
had knowledge of the fact material to the
risk, and honesty, good faith, ….
FOUNDATION OF
CONCEALMENT
THE
RULE
ON
Founded on the principle that insurance
contracts must be entered into in utmost
good faith.
WHAT
IS
THE
CONCEALMENT OF
FACT? (Sec 27)
EFFECT
OF
A MATERIAL
A concealment whether intentional or
unintentional entitles the injured party
to rescind a contract of insurance.
IS CAUSAL CONNECTION BETWEEN
THE CAUSE OF DEATH AND THE
FACT CONCEALED NECESSARY?
*take note of the example (recording) >>
No. Concealment need not in order to be
material, be of facts which bring about,
or contribute to, or are connected with
the insured’s loss. It is immaterial that
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FINALS REVIEWER IN COMMERCIAL LAW REVIEW I
E-COMMERCE ACT AND INSURANCE LAW
there is causal relationship between the
fact concealed and the loss sustained.
WHAT IS REPRESENTATION?
Representation are factual statements
made by the insured at the time of or
prior to the issuance of the policy to give
information to the insurer and otherwise
induce him to enter into the insurance
contract.
*take note of misrepresentation
Concealment
(paglilihim)
vs.
Misrepresentation (Positive assertion of
fact that is not true)
WHEN SHOULD
GIVEN?
REPRESENTATION
At the time of or before the issuance of
policy
MISREPRESENTATION
A misrepresentation is a statement of a
fact known to the insured to be false
with the intention to deceive. Such
misrepresented fact must be material to
the risk assumed by the insurer.
RULE
ON
MISREPRESENTATION
MATERIAL
If the representation is false in a material
point, the injured party is entitled to
rescind the contract from the time the
representation becomes false.
*example breast cancer but she is under
remission – she did not disclose that she
was once a cancer survivor >>
constitutes
misrepresentation
(recording) <<
WHEN SHOULD INSURER EXERCISE
ITS RIGHT TO RESCIND THE
CONTRACT OF INSURANCE?
(Sec 48, RA 10607)
The right to rescind a contract of
insurance given to the insurer must be
exercised
previous
to
the
commencement of an action on the
contract.
HOW LONG IS THE CONTESTABILITY
PERIOD?
Applicable only to life insurance
2 years from the date the life insurance
policy was issued or upon its last
reinstatement.
WHAT IS WARRANTY?
>>to avoid liability….
Written
statement
or
stipulation
inserted on the face of the contract itself,
or clearly incorporated therein where the
insured expressly contracts as to the
existence
of
certain
facts,
circumstances, or conditions. The literal
truth of which is essential to the validity
of the contract of insurance.
*example >> policy issued: residential
house converted to commercial use (part
of the house = bakery) > this breach of
condition was so material, it can be
rescinded..
KINDS OF WARRANTY:
AFFIRMATIVE WARRANTY – relates to
matters which exist at or before the
effectivity of the insurance policy.
PROMISSORY WARRANTY – the
insured undertakes that something
shall be done or omitted after the policy
takes effect and during its continuance.
LEGAL EFFECT OF BREACH
PROMISSORY WARRANTY
OF
As
a
rule,
non-performance
of
affirmative and promissory warranty,
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entitles the insurer to rescind the
contract of insurance.
ARE THERE EXCEPTIONS? YES.
1. When before the time for the
performance of a promissory
warranty the
loss
insured
against happens.
2. When before the time arrives for
the performance of a PW, the
performance becomes unlawful
at the place of the contract.
3. When before the time arrives for
the performance of a PW the
performance
becomes
impossible.
WHAT IS THE LEGAL EFFECT OF
VIOLATON OF WARRANTY?
Violation of material warranty, or any
material provision of the policy, entitles
the other party to rescind the contract.
IF
THE
VIOLATION
OF
THE
WARRANTY DID NOT CONTIBUTE TO
THE LOSS, CAN THE INSURER AVOID
LIABILITY?
A causal connection between the
violation and the loss is not necessary.
Thus, even though the violation of
material warranty did not in any way
contribute to the loss, the other party
may still rescind the policy.
Written documents becomes the policy.
Sec 49- written instrument in which a
contract of insurance is set forth.
Kinds of Policies:
Section 59- open – type of insurance
contract
where
the
compensation/proceeds of such policymade known only at the time of the lost
E.g. motor vehicle insurance policy
Amount to be paid/proceeds depends
on the Loss/damage.
Insured at 2M- amount equivalent to the
value of the items/taken from the vehicle
-C
of
Insurancecontract
of
indemnity- extent of the damage
sustained
Amount determined at the time of the
loss- amount that the insured may
recover from the insurance
Valued-amount received by the insured
is the amount indicated in the policy.
Life insurance policy- entire amount
will be paid upon the death of the
insured
Amount indicated- 1million pesos will be
paid to the beneficiary – death is caused
by accident (double the amount)- 2
million Pesos
*Florendo case; Manila Bankers v. Aban
Case; Ebrado case;
Running – successive
obtained by the insured
= Daisy Sibya v Sunlife ^^ Conflicts with
prior rulings: only 2 months
At the time of the loss
thing/happening of the peril.
Insurance
e.g. issued stocks in trade
Policy
merchandise in the mall/grocery
Contract
of insurance
agreement
between insurer and insured (Section 2)
“keeps on moving”
insurance
of
is
the
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Basis for computing – amount of loss
determined at the time of the
peril/happening of event insured
against.
Life insurance
Stipulation limiting the period for
commencing an action
Revive the into a premium status
Section 63
Xxx Period less than one year from the
time when the cause of accrues is void.
Below one year is void.
From
when
should
the
1-year
prescription period to be counted?
Should be counted from the time that
the insurer rejects the written claim filed
therewith by the insured ,
Effect of Reconsideration- initial period
when the insurer denied the claim.
Will not extend the filing of the action.
Summit Guaranty v De Guzman
Notice of Loss
Loss/Damage/Liability
Property insured was lost
Should the insured notify the insurer?
Yes. 1) inform the carrier that the cargo
has been damaged xxx
Philam Gen Ins v Sweet Lines
l/d/l incumbent upon the insured to
notify the insurer
rationale: to give the insurer to examine
the extent of the injury
examine the loss or there is violation
Reinstatement
Restore it to
Regular premium paying status
Insured applied for life insurance policy
Subsequent premiums was not paid
Can the insured exercise reinstatement
option of the policy as a matter right?
No, reinstatement of the policy is subject
to the mutual agreement bet the insured
and insurer.
Violeta R. Lalican v Insular Life Ass. Co.
Insurer has the right to deny the
insurability of the insured
The matter of reinstating is not
dependent on the wishes of the insured
R is function of mutual agreement bet
Insurer and insured.
Absent the concurrence/acceptance of
the insurer – no reinstatement
Premium
Indispensable requirement/element
in a contract of insurance
Prince or consideration for the an
insurance policy, the payment of
which is indispensable for the validity
of the policy.
Valenzuela v CA
Effect of non-payment of premium
Section 77
1) Premium must be paid first
before the insurance company
be made accountable for the
policy
2) Insurer accepted the risk,
issued the policy, insurer was
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exposed to risk- insured is
already liable the premium
Provision stating that premium is
deemed paid upon issuance of the
policy
If the premium is not paid there is
a valid C of I?
3) Parties have agreed to the
payment in installments of the
premium and partial payment
has been made at the time of loss
No unless and until the premium is
paid there is insurance
Credit payment term allowed?
UCPB v Masagana Telemart
There is nothing in Sec 77 that
prohibits the parties in an IC to
provide a credit term within which to
pay the premium.
The Agreement is not against the law,
morals, good custom, public order or
public policy.
GR non-payment of premiums-deny
the claim
Exception to the general rule
1) In case of a life or industrial life
policy whenever the grace period
provision applies.
e.g. insured died- lapsed -30 day
period
grace provided that period shall
be applicable
2) Acknowledgment in a policy or
contract of Insurance of the
receipt of premium is conclusive
evidence of its pyment, so far as
to make the policy binding, nw
any stipulaton theiren that it
shall not be binding until the
premium is actually paid
Insured- policy was issued
Insurer
Insured-initial
installments
payment;
3
2nd was not paid- fire broke out
Insured can collect against the
policy – there was a credit term
Premium paid after loss but wthin
the credit term= insured can file
claim/recover
After the fire- insured paid the
premium
Within
credit
arrangement=insurer
deny the claim
term
cannot
Double Insurance
Other Insurance Clause
Exists where the same person is
insured by several insurers with
respect to the same subject
matter and interest
a) Same subject matter insured
b) Same interest insured
c) Same risk peril insured
against
d) Same person is insured
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e) Several insurers issued the
policy
Remember: SIRSSS
Significance: one is absent =no
double insurance
e.g.
condominiums
damage, theft
issued separate
condominium
for
DI will not invalidate the C of I,
unless expressly prohibited by
the policy.
Prohibition
on
insurance clause
DI-
other
-fire,
the
3
Insurers can deny liability for
violation of the other insurance
clause.
=no double insurance
Same interest
E.g. Insured applied for Ins P fire,
flood, earthquake; house and lot insured with several insurance
companies
Insurance proceeds- paid to the
bank
Creditor of the insured
Policy procured by the same
insured – proceeds payable to the
insured
No- double insured- payable to
different persons
e.g. House insured
insurance companies
with
3
Payable to the same person
Different perils
Fire
EQ
Loss arising from flood
No DI- differences in the risk
insured against
Where the insurance policy
specifies
as
condition
the
disclosure of existing insurers,
non-discloure thereof is
Geagonia v CA
Prevent in the increase of moral
hazard.
Reinsurance
Contract whereby an insurers
procures a 3rd person to insure
him against loss or liability by
reason of such original insurance.
(Section 95)
Re-insurer to insure the insurer
of the excess/ too much risk.
PROTECTION TO THE INSURER.
Reinsurer and insurer
Insured has nothing to do with
the reinsurance contract.
Insured is not a party.
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CLASSES OF INSURANCE: MASCAFIL
1.
2.
3.
4.
5.
Marine Insurance
Fire Insurance
Casualty Insurance
Suretyship
Life Insurance
IMPLIED WARRANTIES:
1. Implied
warranty
of
seaworthiness
2. Implied
warranty
against
improper deviation
3. Implied warranty on neutrality
of a ship
MARINE INSURANCE
IMPLIED
WARRANTY
SEAWORTHINESS
ON
A ship is seaworthy when reasonably fit
to perform the service and to encounter
the ordinary perils of the voyage
contemplated by the parties to the
policy. (Sec. 116)
An implied warranty of seaworthiness is
complied with if the ship be seaworthy at
the time of the commencement of the
risk. (Sec. 117)
EXCEPTION:
a. When the insurance is made for a
specified length of time, the
implied warranty is not complied
with unless the ship be seaworthy
at the commencement of every
voyage it undertakes during that
time;
b. When the insurance is upon the
cargo which, by the terms of the
policy, description of the voyage,
or established custom of the
trade, is to be transshipped at an
intermediate port, the implied
warranty is not complied with
unless each vessel upon which
the
cargo
is
shipped,
or
transshipped, be seaworthy at the
start of each particular voyage.
When
the
ship
becomes
unseaworthy during the voyage to
which an insurance relates, an
unreasonable delay in repairing the
defect exonerates the insurer on ship
or shipowner’s interest from liability
from any loss arising therefrom. (Sec.
120)
A ship which is seaworthy for the
purpose of an insurance upon the
ship may, nevertheless, by reason of
being unfitted to receive the cargo, be
unseaworthy for the purpose of
insurance upon the cargo. (Sec. 121)
IMPLIED WARRANTY
IMPROPER DEVIATION
AGAINST
Deviation is a departure from the
course of the voyage insured, or an
unreasonable delay in pursuing the
voyage or the commencement of an
entirely different voyage. (Sec. 125)
A deviation is proper: (Sec. 126)
a. When caused by circumstances
over which neither the master nor
the owner of the ship has any
control;
b. When necessary to comply with a
warranty, or to avoid a peril,
whether or not the peril is insured
against;
c. When made in good faith, and
upon reasonable grounds of belief
in its necessity to avoid a peril;
d. When made in good faith, for the
purpose of saving human life or
relieving
another
vessel
in
distress.
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RULE:
An insurer is not liable for any loss
happening to the thing insured
subsequent to an improper deviation.
(Sec. 128)
to, employer’s liability insurance,
motor vehicle liability insurance,
burglary
and
theft
insurance,
personal
accident
and
health
insurance as written by non-life
insurance companies. (Sec. 176)
FIRE INSURANCE
LIFE INSURANCE
The term fire insurance shall include
insurance against loss by fire,
lightning, windstorm, tornado or
earthquake and other allied risks,
when such risks are covered by
extension to fire insurance policies or
under separate policies. (Sec. 169)
Nature: Life insurance is insurance on
human lives and insurance appertaining
thereto or connected therewith. (Sec.
181)
RULE:
An alteration in the use or condition
of a thing insured from that to which
it is limited by the policy made
without the consent of the insurer,
by means within the control of the
insured, and increasing the risks,
entitles an insurer to rescind a
contract of fire insurance. (Sec. 170)
EXCEPTION:
An alteration in the use or condition
of a thing insured from that to which
it is limited by the policy, which does
not increase the risk, does not affect
a contract of fire insurance. (Sec.
171)
RULE ON SUICIDE:
The insurer in a life insurance contract
shall be liable in case of suicide ONLY
when it is committed after the policy
has been in force for a period of two
(2) years from the date of its issue or of
its last reinstatement, unless the policy
provides a shorter period. (Sec. 183)
EXCEPTION
SUICIDE:
ON
THE
RULE
ON
When suicide was committed in the
STATE OF INSANITY shall be
compensable REGARDLESS OF THE
DATE OF COMMISSION. (Sec. 183)
CASUALTY INSURANCE
Nature of Casualty Insurance:
Casualty insurance is insurance
covering loss or liability arising from
accident or mishap, excluding
certain types of loss which by law or
custom are considered as falling
exclusively within the scope of other
types of insurance such as fire or
marine. It includes, but is not limited
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KEY TAKE AWAY:
 Contract of Insurance is an
agreement
whereby
one
undertakes for a consideration to
indemnify another against loss,
damage, or liability arising from
an unknown or contingent event.
(Sec. 2 [1])
 Parties to an insurance contract
are the Insurer, the Insured, and
the Beneficiary.
 Elements of the Contract of
Insurance are PARIS.
 Characteristics
of
Insurance
Contracts are CAPUI.
 Classes
of
Insurance
are
MASCAFIL.
 Insurable Interest is required for
both life and property insurance.
Any stipulation in a policy for the
payment of loss whether the
person insured has or has not any
interest in the property insured is
void.
 Double insurance is not per se
prohibited unless there is an
“other insurance clause”.
 Material concealment, material
misrepresentation and breach of
material warranty are valid
ground for the rescission of the
contract of insurance.
 Premium
payment
is
indispensable in the validity of
the insurance policy.
 In life insurance, rescission of the
insurance contract on the ground
of material concealment or
material misrepresentation is
allowed
only
during
the
contestability period.
 In the event of default in the
premium payment, the life
insurance policy shall contain a
provision on the paid-up benefits
or the Cash Surrender Value.
 Loss and notice of loss must be
clearly established and proved
before an insurance claim can be
authorized.
 A condition, stipulation, or
agreement in any policy of
insurance, limiting the time for
commencing
an
action
thereunder to a period of less
than one year from the time when
the cause of action accrues, is
void.
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